Flashcards in Busines Undertaking Deck (7):
Four forms of Business Undertaking
Private limited company (Ltd)
Public limited company (PLC)
What is involved when you're a Sole Trader?
Involves an individual registering with HMRC as trading from a given date.
Must keep business records if income and expenditure for later inclusion in a VAT tax return. Turnover must be over £80,000, and a self-assessment tax return has been completed.
What is involved when you're in a Partnership?
Still an unincorporated business, but is 2 or more sole traders working together.
Advantage: Relatively simple Accounting, ability to discuss strategy, and ease of access to owner's funds via drawings are still present.
Disadvantage: Personal Liability. If the business gets in debt, and so it one of the partners, the other partners adopts the whole debt (Joint and Several Liability).
What is a Private Limited Company (Ltd)?
An incorporated business, set up by companies house, which is a business entity on its own, separate from the owners, and ending in LTD.
The public cannot buy shares on the stock exchange, and shareholders should offer them to other shareholders if they want to sell. Private sale if not.
What are the Advantages of being a Private Limited Company?
The shareholders personal wealth remains untouched, even if the business gets in debt. Only lose value in the shares they own.
Easy for shareholders to sell shares and move on without disrupting business due to being a stand-alone entity.
What are the Disadvantages of being a Private Limited Company?
- Requirements of HMRC and companies house are far more stringent.
- Taking money out is difficult - only in form of dividends, deduction of income tax, or becoming an employee and operating a payroll system.
- A balance sheet is mandatory.
- A firm of accounts must be used, and an audit may be done by another accountancy.